Whole of share of distribution manipulated
(1) If a * franked distribution * flows indirectly to an entity in an income year in one or more of the following circumstances:
(a) the entity is not a qualified person in relation to the distribution for the purposes of Division 1A of former Part IIIAA of the Income Tax Assessment Act 1936 ;
(b) the Commissioner has made a determination under paragraph 177EA(5)(b) of that Act that no imputation benefit (within the meaning of that section) is to arise in respect of the distribution for the entity;
(c) the Commissioner has made a determination under paragraph 204 - 30(3)(c) of this Act that no * imputation benefit is to arise in respect of the distribution for the entity;
(d) the distribution is treated as an interest payment for the entity under section 207 - 160 of this Act;
(e) the distribution is made as part of a * dividend stripping operation;
(ea) the distribution is one to which section 207 - 157 (which is about distribution washing) applies;
(eb) the distribution is one to which section 207 - 158 (which is about foreign income tax deductions) applies;
then, for the purposes of this Act:
(f) subsection (2), (3) or (4) (as appropriate) applies to the entity in relation to that income year; and
(g) the entity is not entitled to a * tax offset under this Division because of the distribution; and
(h) if the distribution * flows indirectly through the entity to another entity--subsection 207 - 35(3) and section 207 - 45 do not apply to that other entity.
(2) If the * franked distribution * flows indirectly to the entity as a partner in a partnership under subsection 207 - 50(2), the entity can deduct an amount for that income year that is equal to its * share of the * franking credit on the distribution.
(3) If the * franked distribution * flows indirectly to the entity as a beneficiary of a trust under subsection 207 - 50(3), the entity can deduct an amount for that income year that is equal to the lesser of:
(a) its share amount in relation to the distribution that is mentioned in that subsection; and
(b) its * share of the * franking credit on the distribution.
(4) If the * franked distribution * flows indirectly to the entity as the trustee of a trust under subsection 207 - 50(4), the entity's share amount in relation to the distribution that is mentioned in that subsection is to be reduced by the lesser of:
(a) that share amount; and
(b) its * share of the * franking credit on the distribution.
Part of share of distribution manipulated
(a) a * franked distribution * flows indirectly to an entity in an income year; and
(b) the Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution (the specified part ) for the entity;
then, subsection (2), (3) or (4) (as appropriate) applies to the entity on the basis that the amount of its * share of the * franking credit on the distribution is worked out as follows:
(6) In addition, the following apply to an entity covered by subsection (5):
(a) if the distribution would otherwise * flow indirectly through the entity--the entity's * share of the distribution for the purposes of this Act (other than subsection (2), (3) or (4)) is to be reduced by the specified part mentioned in subsection (5);
(b) if the entity would otherwise be entitled to a * tax offset under this Division because of the distribution--the amount of the tax offset is to be worked out as follows:
Example: X is a partner in a partnership to which a franked distribution of $140 is made. The franking credit on the distribution ($60) is included in the assessable income of the partnership under section 207 - 35. X's share of the distribution is $70 and its share of the franking credit on the distribution is $30.
The Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise for X in respect of $42 of the distribution.
Under subsection (5), X will be allowed a deduction of $18.
X is the trustee of a trust and the distribution will flow indirectly through X to beneficiaries of the trust. For the purposes of working out a beneficiary's share of the distribution and its share of the franking credit, X's share of the franked distribution is reduced to $28 under this subsection.
What happens if both subsection 207 - 95(1) and subsection (1) of this section would apply
(7) If, apart from this subsection, both subsection 207 - 95(1) and subsection (1) of this section would apply to an entity in relation to a * franked distribution, then:
(a) subsection (1) of this section applies to the entity; but
(b) subsection 207 - 95(1) does not apply to the entity.
What happens if both subsection 207 - 95(5) and subsection (5) of this section would apply
(8) If, apart from this subsection, both subsection 207 - 95(5) and subsection (5) of this section would apply to an entity in relation to a * franked distribution, then:
(a) apply subsections 207 - 95(5) and (6) first; and
(b) apply subsections (5) and (6) of this section on the basis that:
(i) the amount of the entity's * share of the * franking credit on the distribution had been reduced under subsection 207 - 95(5); and
(ii) the amount of the entity's * share of the distribution
had been reduced under subsection 207 - 95(6).